An open letter to wannabe edtech entrepreneurs: Welcome to the crowd

Hey, thanks for your tweet asking if you should do an edtech startup based on what I saw at this year’s ASU+GSV Education Innovation Summit in Scottsdale, Ariz., the so-called “Davos in the Desert” of technology in education. I’d respond in 140, but I have to fall back to an analog-style letter because Twitter is the enemy of nuance. And understanding what’s involved in being a tech entrepreneur in education – or just what’s currently happening in school edtech, period – is nuanced as hell.

Disruption in the Desert

I know it doesn’t seem like it on the surface. The Summit, hosted by Arizona State University and investment firm GSV Advisors, had all the subtlety of a company sales rally. Speakers repeatedly calling to “Disrupt education!” Star-power general sessions with Reed Hastings of Netflix, Magic Johnson, Lotus-founder-turned-investor Mitch Kapor, U.S. Secretary of Commerce Penny Pritzker, and Jeb Bush. Yes, thatJeb Bush.

It added up to a heady mix of edu policy wonks, venture capitalists, foundations, edtech startups (more than 250 presenting companies), big education corporations and a few hardy teachers, all seeing great potential – and potential profit – from grade school through college graduation. So much so, that the Summit is, after five years and a sell-out crowd of roughly 2,000 people, now arguably the largest edtech conference primarily focused on the industry itself (and not educators).

The heat was intense, and I’m not just talking about the outdoor reception at the Phoenician resort. Paul Maeder of Highlight Capital said it was staggering the number of “refugees” from other areas of tech who have gotten into education in the past few years. So is it time to jump into the hot tub with the cool kids?

Not until you and your app realize there are three lessons to learn before lessons can be learned:

1. There is a bubble. It’s no longer potential, it’s real. Those flatly saying “yes” to the bubble question on stage included Weld North CEO Jonathan Grayer (buyer of two edtech companies in one day this month) and Senior Managing Director Chris Hoehn-Saric of Sterling Partners.

The Twittersphere abuzz

The evidence certainly is there. Venture capital tracker CB Insights said global edtech financing hit more than a half-billion dollars in the first quarter of 2014 alone – a new record. Just two weeks after Google Capital invested $40 million into edtech stalwart Renaissance Learning, it was snapped up in March by a private equity firm for $1.1 billion. Mark Grovic of New Markets Venture Partners and his colleagues on one K-12 strategic investment panel anticipated more dramatic change, noting “we are absolutely in the first inning” and what’s coming, well, “some of it is exciting and some of it is scary.”

But bubbles aren’t all bad. “It brings a lot of talent in,” Grayer noted. Plus capital, Hoehn-Saric added. And it may not pop anytime soon, according to Reed Hastings (also a DreamBox Learning board member), who opined that any bubble today isn’t nearly big enough based on the “incredible tailwind” for edtech’s potential.

This bubble may also not be evenly distributed. A national survey and report released at the conference by the Gates Foundation found that there was a disproportionately higher level of seed investments in edtech firms making products for students, and a lower level of later-stage investments, compared with tech industry investments overall.

2. All educators are not alike. There’s always been a bifurcation in selling student-focused edtech products to K-12 schools (more of a government sale to districts) versus to higher education (more of a consumer sale to students who buy what institutions specify). Yet K-12 itself continues to fracture. Not only do freemium apps and websites aimed at individual teachers smack of consumer sales, but schools themselves are diverging.

Big education Magic

“We tend to talk about education as if it’s one thing or one industry,” observed Jonathan Harber, founder of SchoolNet and later a Pearson executive when the world’s largest education company bought his startup. But it’s not, and that causes problems.

The growing number of tech-friendly charter schools – a movement promoted both subtly and overtly at the summit (Hastings’ message might well have been “let a thousand, no, a hundred-thousand, charters bloom”) – are creating a broader split in K-12. The geek school continuum now runs from a growing number of tech-experimental charter public schools with money, to existing tech-savvy non-charters with grit, to the broke and we-just-want-it-to-work everyone else. And to you, the entrepreneur, what might have seemed like a single market suddenly becomes a puzzle without precision-cut pieces.

3. Edtech is not new. Just because iPads in classrooms and Facebook-like software interfaces are the rage doesn’t mean education technology hardware and software didn’t exist pre-2010. If you really want to improve education, do a little homework of your own. Not just back to the days of Oregon Trail, SMART interactive white boards and Renaissance Learning (did I mention that billon-dollar baby was founded in 1984?), but to all of the failed early Internet education startups shrouded by the dot-com-bust veil of amnesia.

Sometimes a historic startup failed because it was a bad idea. Sometimes it failed because it was a good idea too early. And sometimes it persisted but should have failed because it automated and reinforced bad educational practice instead of helping support and promote good practice and student learning. It’s important to know the difference. Don’t let it constrain you, but grok that teacher baseline.

Oh. One more thing. If your edtech idea is truly transformational, even if there’s a desperate need for it, even if it works as advertised, even if it’s free-free-free, prepare to be hated. As Hoehn-Saric summed up, “When you’re going in to change the system, there’s always hostility.”

I guess I could have fit that into 140 characters.

Frank Catalano (@FrankCatalano) is an independent consultant to firms in education and consumer technology, a veteran industry analyst, and a professional speaker and author. His regular GeekWire columns take a practical nerd’s approach to tech.

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Comments

I bet you could come up with another 6 reasons why an edtech startup could have failed. Good piece of writing. I’m proud to say that I was once, for a short while, Frank Catalano.

http://www.intrinsicstrategy.com/ FrankCatalano

Hey, someone has to be me when I can’t be. And thanks. The idea here is not to discourage, but to provide some context for startups aborning.

http://www.educatedventures.com/ Christopher Nyren

Nice post. You might have also pointed out that the “Billion dollar” exit Renaissance was previously valued at a Billion as far back as 1999, further hitting home the challenges of scaling in K-12. You can also refer to my EdTech Hype Bubble Post back in the fall: http://bit.ly/FirstCrackEdTech